Question

On september 1 of the current year, zimmerman collected six months' rent of $8,220 on storage space. At that date, zimmerman debited cash and credited unearned rent revenue for $8,220. On october 1 of the current year, the company borrowed $15,600 from a local bank and signed a one-year, 14 percent note for that amount. The principal and interest are payable on the maturity date. Depreciation of $1,700 must be recognized on a service truck purchased in july of the current year at a cost of $15,000. Cash of $5,700 was collected on november of the current year, for services to be rendered evenly over the next year beginning on november 1 of the current year. Unearned service revenue was credited when the cash was received.

Answer 1

A. Dr Unearned rent revenue 5,480

Cr Rent revenue 5,480

B. Dr Interest expense 546

Cr Interest payable 546

C. Dr Depreciation expense 1,700

Cr Accumulated depreciation 1,700

D. Dr Unearned service revenue 950

Cr Service revenue 950

Step-by-step explanation:

a. DEFFERED REVENUE

Dr Unearned rent revenue 5,480

Cr Rent revenue 5,480

($8,220 ÷ 6 months = $1,370 per month x 4 months)

b. ACCRUED EXPENSE

Dr Interest expense 546

Cr Interest payable 546

($15,600 x .14 x 3/12)

c. DEFFERED EXPENSE

Dr Depreciation expense 1,700

Cr Accumulated depreciation 1,700

d. DEFFERED REVENUE

Dr Unearned service revenue 950

Cr Service revenue 950

($5,700 x 2/12)